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Manifestly Unfair Marital Agreements
By Bari Brandes Corbin
Part Two of a Two-Part Article
In last month’s issue, we began an analysis of
case law that followed the seminal decision in Christian v.Christian, 42
NY2d 63 (1977), in which the Appellate Division declared that a marital
agreement can be set aside if it is "manifestly unfair," even if a
similar contract between parties in a less "fiduciary" relationship
would be upheld.
‘UNFAIR’ AND ‘UNCONSCIONABLE’: FURTHER GUIDANCE
In Terio v. Terio, 150 AD2d 675 (2d Dept.
1989), a brief memorandum decision, the Second Department affirmed an
order of the Supreme Court that, after a hearing, set aside the
financial provisions of a separation agreement entered into in 1987
during the pendency of the parties’ divorce action. The wife claimed
that she ignored the advice of her counsel when she signed it. The
appellate court found it significant that the parties were married for
over 35 years and that the wife claimed that the husband continually
pressured her until she signed the agreement. It further found that the
terms of the agreement gave rise to an inference of overreaching,
because they were manifestly unfair to plaintiff, but the court gave no
indication as to what those terms were.
In Battista v. Battista, 482 NYS2d 63 (3d
Dept.1984), the court noted that the attorney testified that relevant
facts and the legal ramifications of certain clauses in the agreement
were not fully discussed with or disclosed to plaintiff. Nor could he
recall if he explained the Equitable Distribution Law to plaintiff and
the benefits of her husband’s employment, which she relinquished. For
her part, plaintiff testified that she did not comprehend her right to
equitable distribution of the marital property. Finally, the financial
status of both parties was not disclosed to the attorney to enable any
meaningful discussion.
In Gibson v. Gibson, 284 AD2d 908 (4th Dept.
2001), the Appellate Division held that the wife was entitled to an
order setting aside a property settlement and separation agreement on
the grounds it was manifestly unfair because plaintiff received no share
of the business that was the sole source of income for both parties, and
received no share of the parties’ net assets of approximately $235,000.
While the defendant assumed the liabilities of the business, the
business also provided him with future benefits, such as contracts that
would generate revenues over and above their cost. Pursuant to the
agreement, the plaintiff was left with no resources and no source of
income or other means of support.
We can only surmise the reason the Appellate
Division set aside the provisions of the parties’ separation agreement
relating to economic issues in Yoell-Mirel v. Mirel, 34 A.D.3d 796 (2d
Dept. 2006), apparently on the grounds that it was manifestly unfair.
The agreement was drafted by the wife and signed by the parties without
legal counsel. Supreme Court entered a judgment incorporating the terms
of the agreement which related to economic issues, except for a
provision concerning the marital home, which the Supreme Court
determined denied the husband his interest in a significant marital
asset without countervailing benefit. The Supreme Court rewrote that
provision to provide the wife with a more limited interest in the
marital home, and incorporated the rewritten provision into the
judgment. The Appellate Division held that the Supreme Court erred in
rewriting rather than setting aside the provision of the agreement
concerning the marital home. It also held that the Supreme Court erred
in entering a judgment incorporating the provision of the agreement
concerning child support since it neither complied with nor validly
opted-out of the relevant statutory guidelines, and erred in
incorporating the remaining portions of the agreement which related to
economic issues and dismissing all other claims for relief, as the
agreement neither waived nor adequately addressed various significant
economic issues. The court held that given the interrelated nature of
the economic issues addressed by the provisions of the agreement and
those not adequately addressed by the agreement, the whole of the
agreement as it related to economic issues should have been set aside.
In Bright v. Freeman, 24 AD3d 586 (2d Dept.
2005), the doctrine of manifest unfairness was applied to an agreement
between an unmarried couple. The parties, who were never married, were
the parents of two children. When they separated, they entered into a
"separation and child support agreement" pursuant to which the father
agreed to pay child support in the sum of $450 per month per child. The
father brought action for judgment declaring that the child support
agreement between himself and the children’s mother was valid and
enforceable. The Supreme Court granted the father’s motion for summary
judgment, declaring that "the agreement is enforceable." The Appellate
Division reversed the order on the law, and upon searching the record,
granted summary judgment declaring that the agreement was unconscionable
and unenforceable. The Appellate Division concluded that "the agreement
is so one-sided and inequitable as to be unconscionable." It was of such
a quality that no reasonable and competent person would have consented
to it.
CONCLUSION
In each of the cases since Christian, where the
agreement was set aside as manifestly unfair, the unfair financial terms
of the agreement and the great disparity in the distribution of the
marital assets were considered by the court when it reached the
conclusion that the agreement was manifestly unfair and that there was
overreaching in its execution. The absence of independent counsel and
the fact that no disclosure was made appear to be the other significant
factors considered by the courts in determining whether an agreement is
unfair. See Jaus v. Jaus 562 NYS2d 727 (2d Dept. 1990). A substantially
disproportionate allocation in the Christian case was the most important
factor considered. However, Christian was a case of omission, since that
court held that the husband had a duty to disclose the values of the
assets to the wife. As Christian held, the particular result reached by
the parties may warrant an inference of overreaching and a determination
that an agreement is manifestly unfair.
In a recently decided case, D.M. v. K.M., 14
Misc.3d 1206(a), Slip Copy, 2006 WL 3742801 (Table) *N.Y.Sup., 2006).
Justice Visitacion-Lewis noted, in accordance with Christian, that in
determining the validity of a separation agreement, the court would look
at the terms of the agreement to see if there is an inference — or even
a negative inference — of overreaching in its execution. It would also
take into account the conditions under which the agreement was signed.
The court found that the ex-husband in D.M. v. K.M. was the only party
who stood to benefit from the terms of the amended agreement, which
relieved him of his obligation to pay his ex-wife nearly $1 million of
his originally stipulated maintenance obligation of more than $1.5
million. The ex-wife, meanwhile, was giving up not only her rights to
most of her spousal support but also to custody of her children and the
corresponding right to receive child support. She gained nothing
whatsoever from the amended agreement. In addition, although the
ex-husband told the plaintiff that no attorneys would be involved in the
renegotiation process, he received his attorney’sadvice on the issue,
and had his attorney write up the agreement. The ex-wife had no attorney
representation. Finally, the circumstances of the signing were not
conducive to the ex-wife’s calm reflection, as plaintiff and his
attorney briefly metwith her in her apartment building’s lobby to
present her with the document,telling her the attorney was there to
notarize her signature. There was no discussion of the terms
incorporated in the amended agreement. Concluded Justice
Visitacion-Lewis: "Given that plaintiff was well aware that defendant
was drinking regularly during this period, the circumstances under which
the amended agreement was executed, together with its inequitable terms,
constitute overreaching by plaintiff. Because equity will not validate
separation agreements ‘born of and subsisting in inequity’ (Christian at
72), the parties’ Amended Agreement is void ab initio and
unenforceable."
Bari Brandes Corbin maintains her offices for
the practice of law in Laurel Hollow, NY. She is Vice-President of Joel
R. Brandes Consulting Services Inc., Jersey City, NJ, and Ft.
Lauderdale, FL. © Copyright, 2006. Joel R. Brandes Consulting Services,
Inc. and Bari Brandes Corbin. All rights reserved.
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4 New York Family Law Monthly www.ljnonline.com/alm?nyfam
April 2007
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